New York Enacting Nation’s First Statewide Data Center Moratorium  

Commercial real estate’s booming data center industry is suddenly not in an Empire State of mind.

New York Gov. Kathy Hochul signed an executive order Tuesday morning enacting the nation’s first statewide moratorium on construction of the large-scale data center facilities that have been powering the country’s increased usage of AI. The move, which includes a one-year ban on new data centers with at least 50 megawatts, also directs state regulators to create new standards for addressing environmental, energy and water-use impacts.

“As data center development threatens to hike up utility bills, deplete our natural resources, and create uncertainty for New Yorkers, it’s my responsibility to take action and lead,” Hochul said in a statement.

Hochul’s order comes five weeks after the New York State Legislature passed a bill that would also impose a one-year data center moratorium in an attempt to create more guardrails. Maine lawmakers attempted a similar data center moratorium this past spring before the legislation was vetoed by Gov. Janet Mills. 

An announcement from Hochul on Tuesday said that the increase in demand for data center development in New York, driven largely by AI, has led to an influx of proposals that could require “massive amounts of energy and water to run and cool thousands of computer servers.”

Earlier this year, Hochul also ordered the state’s Department of Public Services (DPS) to begin a program requiring data centers to either pay more for their energy or supply their own, as well as to develop a Generic Environmental Impact Statement (GEIS) to ensure new data centers are being held to “consistent standards.” Once those standards are finalized, the moratorium will be lifted, allowing new projects to proceed as long as they follow state, zoning and local approvals, according to Hochul’s announcement.

However, experts from global law firm HSF Kramer said the moratorium is simply the governor’s way of stopping something that can’t be stopped.

“Data centers are simply a fact of life. Everyone using AI relies on data centers to process AI systems. Any concern about safety is easily addressed without a moratorium,” Jay Neveloff, chair of U.S. real estate at HSF Kramer, said in a statement to Commercial Observer.

“Governments imposing moratoriums is a way of  governments stopping something. This market simply cannot be stopped. Any state that stands in the way of progress will be left behind,” Neveloff added. “New York needs the jobs and economic stimulus, and it should not stand above the competitive nature of states seeking to encourage economic growth.”

Andrew Coen can be reached at acoen@commercialobserver.com.